Navigating the RFP Process – Perspectives from the Public and Private Sectors
Navigating the public agency RFP process can be a challenge for even the most experienced real estate developers. ULI New York’s Navigating the RFP Process pulled back the curtain to reveal how public agencies attempt to achieve their goals and objectives while ensuring fair dealing through competitive Requests for Proposals.
According to Patrick O’Sullivan, EVP and co-head of the Real Estate Transaction Services at the New York City Economic Development Corporation, the benefits of an RFP are that it:
- Allows the agency to thoroughly think through a given project’s goals and objectives
- Provides a “rules of the road” for the agency and respondents
- Casts the widest possible net in terms of ideas and types of respondents
Mehul Patel, Chief of Staff at the Empire State Development Corporation, added that the RFP process sanctifies the deal and ensures a fair process. Ultimately, the development agency needs to be able to justify the project to local officials and the community. If the agency or city is sued over the handling of the process, it could delay a project (and the potential revenue stream from that project) for years. Therefore, it is a primary concern of the agency issuing the RFP that the process minimizes the likelihood of legal proceedings.
While public agencies are seeking to maximize the revenue generated for a deal, price is not their only priority. A developer’s reputation and ability to execute are critical factors. The agency must be convinced that the project is viable. In addition, responses to RFPs are frequently evaluated not only on whether they meet a project’s stated goals and objectives, but how they play into broader agency priorities, such as jobs or housing. Backing from community organizations and elected officials is also important, although not an explicit requirement.
“For the RFP responses we’ve been successful on, I could pick out any point on the site plan and brag about it,” said Aaron Koffman, Director of Affordable Housing at The Hudson Companies.
Developers and agencies also spend a lot of time on deal structure. Some agencies, like the EDC, are starting to use ground lease structures more in order to retain an additional level of control in their deals. However, it can be also presents challenges to realizing the value of the property upfront and makes financing the project more complicated for the developer. Mixed-use projects tend to be even more complicated due to additional financing, legal, code, and design requirements.
When it comes to who is reviewing the RFP submission, the agencies generally have a team that includes a financial analyst, an urban planner or architect, an attorney, and a procurement expert. For large projects, outside advisory panels are sometimes brought in.
Due to the complexity of responding to RFPs, real estate developers have to pick and choose their projects wisely.
“The capacity of our team and the field of probable responders are the two most important decision making factors when deciding whether or not to respond to an RFP,” said Koffman. Developers also frequently look to partner with other developers and community groups who can give them a competitive advantage. Roger Pine, VP of Acquisitions and Development at Lettire Construction, who moderated the panel, likened the process of selecting partners as similar to asking someone to a middle school dance in that it is fraught with similar emotions.
In addition to developing a thick skin, taking the long view is also important since many projects are not fully realized until years later. “HOK developed a master plan for St. George’s terminal on Staten Island 15 years before it became a reality,” said Ken Drucker, Director of Design at HOK, referring to the recently approved Empire Outlets and The New York Wheel, which will be the tallest observation wheel in the world upon completion.